WASHINGTON—House and Senate lawmakers face a major challenge in trying to reconcile differences over legislation that would subject foreign investment in wireless and other U.S. business sectors to stiffer national security review, with some lawmakers keenly aware that a heavy-handed approach could backfire and kill jobs in their states.
Legislation to reform the Committee on Foreign Investment in the United States, prompted by the outcry and later the scuttling of the Dubai Ports World deal earlier this year, normally would have a relatively decent chance this fall of getting out of a GOP-controlled Congress that is laser focused on security-related bills.
But the outcome is far from certain because lawmakers are bound to encounter difficulties in attempting to merge a less-restrictive CFIUS reform bill from the House, where all members face challenges in the November midterm elections, with a more stringent Senate bill.
CFIUS approval is the final hurdle facing French telecom vendor giant Alcatel Inc. in its proposed $10.4 billion purchase of U.S.-based Lucent Technologies Inc., following approval by both companies’ shareholders last week.
About six years ago, CFIUS was asked to review a deal in which Deutsche Telekom AG, then 58-percent owned by the German government, sought to buy VoiceStream Wireless Corp. (now T-Mobile USA Inc.) The purchase triggered uproar by former Sen. Ernest Hollings (D-S.C.) before and after CFIUS and the Federal Communications Commission approved the acquisition. The FCC ruled federal law does not prevent a company more than 25-percent indirectly owned by a foreign government from buying an American wireless carrier if the transaction is deemed to be in the public interest. The FCC said the DT-VoiceStream deal met that test.
While Hollings largely stood alone in his protest of the trans-Atlantic transaction at the time, lawmakers have become more prone to challenging and criticizing foreign investment in U.S. companies—particularly those with critical infrastructure—since the Sept. 11, 2001, terrorist attacks. But lawmakers—even defense hawks—are being forced to weigh national security against parochial economic interests in their home states and districts.
A good example is Sen. Rick Santorum (R-Pa.), who is fighting an uphill battle to keep his seat in Congress.
“I firmly believe that national security is paramount, and confidence must be restored in the CFIUS screening process. CFIUS creates a careful balance between national security and the economic benefits of foreign investment. As such, we must protect our national security while not inadvertently and unnecessarily hurting this job-creating investment,” said Santorum in late July, the day after the Senate approved a CFIUS reform bill penned by Senate Banking Committee Chairman Richard Shelby (R-Ala.).
“Over 5 million Americans work for in-sourcing companies with a payroll of nearly $318 billion. In my state of Pennsylvania, 227,700 people owe their jobs to a foreign-based company. Pennsylvania is a state that has worked hard to attract international companies like Mack Trucks Inc., SAP America and Sony. That effort has yielded positive results,” said Santorum.
Another ardent conservative, Sen. Jim Bunning (R-Ky.), who eked out a second-term victory he was supposed to have won easily in 2004, also cautioned against overkill in CFIUS reform.
“National security is our priority, but it is vital that we not let overreaction from the Dubai Ports World controversy result in hasty legislation that will choke off foreign direct investment, or `in-sourcing,’ which is a key contributor to the U.S. economy,” said Bunning last month. “In my own state, 87,000 people, or 6 percent of the entire state workforce, are employed by in-sourcing companies. These are good jobs, most frequently in manufacturing, paying 34-percent higher wages on average.”
Santorum and Bunning perhaps would be less anxious if the Senate’s CFIUS reform bill looked more like the House version.
